La Organización Externa De La Distribución Comercial En Las Compañías De Seguro En España: Redes De Agentes Y Sus Costes (1900-1950)
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La organización externa de la distribución comercial en las compañías de seguro en España: redes de agentes y sus costes (1900-1950) The external organisation of commercial distribution in insurance companies in Spain: networks of agents and their costs (1900-1950) Jerònia Pons Pons & Pablo Gutiérrez González RESUMEN El objetivo de este trabajo es analizar la naturaleza de las relaciones entre las compañías aseguradoras españolas y los agentes representantes que articularon las redes de distribución de seguro en España durante la primera mitad del siglo XX. Para ello, se ha recurrido a documentación de las principales compañías con el objetivo de examinar el marco de dichas relaciones, a saber: los diseños de los contratos de agencia, la negociación de las comisiones o las pautas de inspección y supervisión de la acción de los agentes. Utilizando el marco interpretativo de la teoría de la agencia, este trabajo pretende arrojar luz sobre las problemáticas y dinámicas que definieron la distribución de un producto financiero complejo como el seguro en una economía de desarrollo tardío. ABSTRACT The objective of this paper is to analyse the nature of the relationships between the main insurance companies in Spain and the agents who comprised the insurance distribution networks in this country during the first half of the twentieth century. To achieve this goal, we have gone through documentary sources from the main companies in order to examine the framework of these relationships, namely: the design of agency contracts, the negotiation of commissions and the guidelines for inspections and the supervision of agents. Using the framework of agency theory, this paper aims to enhance our understanding of the conflicts and dynamics that determined the distribution of such a complex financial product as insurance in a late development economy. 1. Introduction Starting in the mid-nineteenth century, the introduction of new techniques and resources arriving from abroad and their adaptation to the specific characteristics of the Spanish economy fostered the expansion of the insurance market.1 The entry of foreign companies injected new capital into the sector, while access to international reinsurance networks provided the Spanish economy with subscription capacity and risk diversification services.2 The importation of actuarial instruments such as mortality tables enabled a more precise planning and design of companies’ risk portfolios, while also facilitating the spread of products associated to life insurance.3 At the same time, management and supervision techniques adapted from foreign companies contributed to consolidating the sector.4 One of the key elements in the growth of the business was the establishment of distribution networks adapted to the complex reality of the Spanish market. The need to come up with forms of organisation that were flexible and able to provide coverage for large geographical areas with a very limited demand made the agency system a vital element in the consolidation of the market.5 Especially from the turn of the century onwards, insurance companies had to find and train independent agents who were capable of creating a client portfolio and maintaining it over time. Certainly, while during the nineteenth century insurers had focused on the main Spanish cities, the growth in market potential beyond Madrid, Barcelona, Bilbao and Malaga opened up new horizons for the sector. The business opportunities in smaller provincial capitals and small developing cities led to the establishment of extensive networks of agents to represent companies. Within this context, the Spanish insurance 1 Frax and Matilla (1996; 1998) and Pons (2002; 2003), among others, have commented on the growth of the market from the last third of the 19th century and, in particular, after the passage of the first general insurance legislation in 1908. 2 Pons (2005; 2007; 2008; 2010a; 2012) and Pearson (2010a) have highlighted the contribution of foreign companies to Spanish insurance, both in the form of the direct establishment of branch offices and through the acquisition of subsidiaries. For a case study of the Zurich group in Spain, see Pons (2015). Pearson (2010b) and Gutiérrez and Pons (2017a; 2017b) have emphasised the close links between Spanish insurance and the international reinsurance market. For an empirical analysis of the contribution of international reinsurance to the insurance sector in Spain, see Gutiérrez and Andersson (2017). 3 Pons and Gutiérrez (2016) have analysed the backwardness of actuarial techniques in Spain and have highlighted the use of foreign mortality tables as instruments for maximising profits, both by multinational companies and by Spanish insurers. 4 Pearson (2012) explores the pioneering nature of British insurance in terms of management and business organisation techniques, while Pons (2004; 2008; 2010b; 2012) analyses the influence of British companies not only on the internal organisation of the companies in Spain, but also on the forms of association and cartelisation of the market. 5 According to Carreras and Tafunell (2005: 484), in 1900, more than 67 per cent of the Spanish population continued residing in municipalities of less than 10,000 inhabitants, and more than 27 per cent lived in localities of less than 2,000 inhabitants, which meant that demand was very dispersed. 2 market became the scenario of competition, not only between agents to increase their portfolios, but also between insurers who sought the services of the producers who could perform best in local markets.6 These developments led to the creation of agency relationships between representatives and companies, embodied in increasingly complex and detailed contracts designed to protect the positions of both parties. Moreover, the dynamics of the insurance market itself encouraged the development, on the basis of representatives directly linked to companies, of extensive subcontracting networks that contributed to channelling the supply in extensive Spanish regions.7 Far from being established as homogeneous practices, insurance companies focused their distribution strategies in very different ways: mutual and joint-stock companies revealed different dynamics that were reflected in both their results and their distribution costs.8 This form of organisation would enable the market to be extended to the vast Spanish rural world much before the introduction and spread of the branch system from the 1920s. In view of all the above, the aim of this paper is to analyse the nature and performance of insurance distribution networks within the framework of agency theory, paying special attention to the selection of agents, contract conditions, network control systems, conflicts and the costs of the relationships between companies and agents. To this end, the second section analyses the evolution of distribution systems in Spain from the late nineteenth century until the mid-twentieth century, contrasting their effects on the main indicators of the Spanish insurance market. The third section analyses the distribution strategies implemented by a foreign insurer from the planning stage of its entry into Spain until the consolidation of a network of sub-agencies during the nineteenth century. The fourth section explores two cases of mixed production networks: the case of the Mutua General de Seguros and the interactions between agencies and branches, and the Zurich-Hispania pairing and the institution of shared 6 According to the figures for contributors in the Estadística sobre la Contribución de Utilidades de la Riqueza Mobiliaria (ECURM), there were 301 external agents of insurance companies registered in Spain in 1901; whereas just three decades later, in 1932, this figure had risen to 5,820. See ECURM, Years 1901 and 1932. 7 For example, in the case of Andalusia, there were 74 registered insurance agents in 1932: however, far from being uniformly distributed, these were concentrated in the provinces of Cordoba (14), Seville (30) and Malaga (30). The rest of the territory depended directly on auxiliary networks of these sales agents. See ECURM, 1932. 8 Regan and Tennyson (1996; 2000) and Regan (1997) have analysed the repercussions of the form of organisation on distribution costs and the final choice between exclusive or independent agents. 3 distribution networks within a foreign insurance group in Spain. Finally, some general conclusions are added. 2. Distribution systems in the Spanish insurance market Insurance companies use different mechanisms to distribute their products in the market. Insurers sell their policies through sales personnel employed directly by the company or through external agents, these latter either being contracted on an exclusive basis by a single company or working as independent sellers with agreements with different insurers.9 The choice of one method or another has important repercussions on the insurer’s results, as in the first case the information on customers belongs to the company, while in the other cases it belongs to the agent.10 Meanwhile, the relationship of the sales agent with the insurer entails different profiles in the selection and monitoring of the risks accepted and, consequently, in the company’s production costs. Moreover, research on business and portfolio management points to a direct relationship between the choice of the distribution system and firms’ different ownership structures. In this respect, Milgrom and Roberts (1990) indicate that the use of independent agents maximises